For the first time in history the globe has invested more money in electricity than oil according to the International Energy Agency(IEA) and while that may seem to inspire thoughts of electric cars and cheap shale oil, the truth is it’s a problem we will have to deal with at some point in the future. The IEA issued a warning that because of a 20 percent drop in global energy investment over the past three years, we are laying the groundwork for oil and electricity shortages in the future.

The IEA said that oil and natural gas energy investment and power plant upgrades around the globe were only 1.7 trillion dollars which are actually down 12% percent from last year and 17% lower than 2014. A lot of that investment seemed to go into shale that skyrocketed by 50% as producers hoped to make a quick return on their money with no concern about the long-term viability of the project and with no concern for the looming future supply shortage. While right now we have ample supply, the IEA says that underinvestment “points to a risk of market tightness and under-capacity at some point down the line.”

The IEA said, “The largest planned increase in upstream spending in 2017 in percentage terms is in the United States, in shale assets that have benefited from a reduction in breakeven prices because of a combination of improvement in costs and efficiency gains.” Marketwatch said, “The big rise in U.S. activities is expected to give global upstream — or exploration and production — investments a 6% bump in 2017, following a 44% plunge between 2014 and 2016. Russia and the Middle East are also seen ramping up spending on upstream projects, albeit at a slower pace, as the chart below shows.” 

Reuter’s reported that “This decline (in energy investment) is attributed to two reasons,” IEA chief economist Laszlo Varro told journalists. “The reaction of the oil and gas industry to the prolonged period of low oil prices which was a period of harsh investment cuts; and technological progress which is reducing investment costs in both renewable power and in oil and gas,” he said.